Steve Jobs was more than just a tech guru and design genius; he was arguably one of the better business minds of the late 20th and early 21st century. Don’t believe us? Check out this email exchange between Jobs, iTunes head Eddy Cue, James Murdoch, a News Corp. executive, and Brian Murray, CEO of HarperCollins.
As you read, remember that this conversation took place in 2010, just prior to the iPad’s release, and that HarperCollins was dragging its feet on signing a deal with iTunes that would allow Apple to make good on its product’s biggest promise: all of the media you need, in one convenient place.
Here’s an excerpt, courtesy of Quartz:
A few thoughts to consider (I’d appreciate it if we can keep this between you and me):
1. The current business model of companies like Amazon distributing ebooks below cost or without making a reasonable profit isn’t sustainable for long. As ebooks become a larger business, distributors will need to make at least a small profit, and you will want this too so that they invest in the future of the business with infrastructure, marketing, etc.
2. All the major publishers tell us that Amazon’s $9.99 price for new releases is eroding the value perception of their products in customer’s minds, and they do not want this practice to continue for new releases.
3. Apple is proposing to give the cost benefits of a book without raw materials, distribution, remaindering, cost of capital, bad debt, etc., to the customer, not Apple. This is why a new release would be priced at $12.99, say, instead of $16.99 or even higher. Apple doesn’t want to make more than the slim profit margin it makes distributing music, movies, etc.
4. $9 per new release should represent a gross margin neutral business model for the publishers. We are not asking them to make any less money. As for the artists, giving them the same amount of royalty as they make today, leaving the publisher with the same profits, is as easy as sending them all a letter telling them that you are paying them a higher percentage for ebooks. They won’t be sad.
5. Analysts estimate that Amazon has sold more than one million Kindles in 18+ months (Amazon has never said). We will sell more of our new devices than all of the Kindles ever sold during the first few weeks they are on sale. If you stick with just Amazon, Sony, etc., you will likely be sitting on the sidelines of the mainstream ebook revolution.
6. Customers will demand an end-to-end solution, meaning an online bookstore that carries the books, handles the transactions with their credit cards, and delivers the books seamlessly to their device. So far, there are only two companies who have demonstrated online stores with significant transaction volume — Apple and Amazon. Apple’s iTunes Store and App Store have over 120 million customers with credit cards on file and have downloaded over 12 billion products. This is the type of online assets that will be required to scale the ebook business into something that matters to the publishers.
So, yes, getting around $9 per new release is less than the $12.50 or so that Amazon is currently paying. But the current situation is not sustainable and not a strong foundation upon which to build an ebook business.
[A portion of this email was redacted by the court.]
Apple is the only other company currently capable of making a serious impact, and we have 4 of the 6 big publishers signed up already. Once we open things up for the second tier of publishers, we will have plenty of books to offer. We’d love to have HC among them.
Thanks for listening.
Emily Co at SavvySugar points out that this whole email exchange seems to go against most of the advice we get (and give) about negotiating. First and foremost, aren’t we supposed to avoid negotiating over email?
The answer, of course, is that if you can do it very well (like, Steve Jobs-level well) you can do whatever you want. Co provides a list of ways you can improve your negotiation tactics, if you’re not quite up to Jobs’ level yet.
A few things we can take away from this:
1. Write well, and seriously. This means spelling everything correctly and arranging your sentences with care, but also avoiding exclamation points, emoticons, and text-speak. If you’re going to negotiate over email, make sure you don’t fall into the trap of treating it like a text message.
2. Mind your formatting. Bullets are amazing for making your points, because it’s harder for the recipient to skim over one of your concerns.
3. Be aggressive, but polite. There are no weasel words in Jobs’ email, but he seems genuine, as well as direct. You believe, upon reading this message, that he really would like to work with HarperCollins. But you also believe that if they choose not to work with him, he will do his best to send them to Apple Jail, where they will be incarcerated alongside Flash.
4. Use your numbers, as well as your words. There’s nothing more persuasive to a businessman than money. If possible, tie your points to profit.
5. Sell yourself, and your products. As Co mentions, Jobs was a great salesman, on top of all his other hats. Check out the confidence in this statement: “We will sell more of our new devices than all of the Kindles ever sold during the first few weeks they are on sale. If you stick with just Amazon, Sony, etc., you will likely be sitting on the sidelines of the mainstream ebook revolution.”
Now that’s a persuasive argument.
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